Surrogacy’s ashes prove fertile for India’s large IVF chains

Up until recently, Akanksha Infertility Clinic in Anand, Gujarat, was the leading surrogacy clinic in India. At its peak in 2015, the clinic saw 185 births through surrogacy. Today, things are different. The majority of beds in the hostel for surrogate mothers lie empty. The once-serpentine queues of couples—both foreign and Indian—are now markedly shorter. In 2018, the number of surrogate deliveries in the hospital had dropped to just 95—almost half its peak numbers. Plans to build another such center have now been scrapped, says Akanksha founder Nayna Patel, a doctor specializing in vitro fertilization (IVF) and surrogacy.

Ban on commercial surrogacy

Surrogacy in India has been on the wane since the law to ban commercial surrogacy was first proposed in 2016. In commercial surrogacy, women essentially rent their wombs to couples looking to have a child. The government felt that this form of surrogacy had become a tool to exploit poor and vulnerable Indian women. Instead of commercial surrogacy, the bill suggested a far less common practice in India—altruistic surrogacy. In the former, the arrangement is purely commercial; whereas in the latter, the couple contract a ‘close relative’ who selflessly agrees to carry their baby.

In December 2018, the bill was passed by the Lok Sabha—the lower house of India’s parliament. However, it was not passed by the upper house before elections began earlier this month, leading to the bill lapsing. The law’s future and, along with it, the future of the once-lucrative industry is uncertain.

While the estimates on the size of the industry vary widely. A 2012 study from the University of Columbia pegged it at $400 million. However, more recently in 2017, the government pegged it at $2 billion. Infertility clinics and investors that The Ken spoke to, however, concur that the size of the fertility market in general and surrogacy, in particular, has shrunk considerably over the last two years.

Public impression

One of the reasons is the perception of illegality that taints it. Although commercial surrogacy is not illegal in India as of today, the public impression is that it is. The other major reason is the ban on foreign couples opting for surrogacy.

“People have a fear now. This can stop anytime. They wonder what will happen if the law is passed while they are in the middle of the pregnancy,” says Nayna Patel, the celebrated doctor-entrepreneur. Patel’s success with Akanksha has helped her build a global reputation, delivering TED talks and appearing on the Oprah Winfrey Show. Now, she finds herself counseling anxious couples unsure about whether they should opt for surrogacy. They are not sure if surrogacy is legal or not right now—could they be charged under the law if and when it is enacted? What if they have one child via surrogacy and they cannot have a second because by then the practice is banned.

Unsurprisingly, Akanksha’s business has dropped. It is the same story across infertility clinics known for surrogacy in metro cities. Take, for example, Surrogacy Centre India and International Fertility Centre, both located in Delhi. Surrogacy contributed to the majority of their revenue—estimated somewhere between 70% to 90%. Not because of the volumes but the value. Consider this. Every cycle of IVF—a series of procedures used to treat infertility—could cost between Rs 1-2 lakh ($1,430-$2,860). In the case of surrogacy, however, the entire treatment could be priced anywhere between Rs 10 lakh ($14,300) to Rs 20 lakh ($28,600).

Managed by the clinic

The founder of a fertility clinic chain headquartered in Bengaluru says that IVF and surrogacy should ideally cost the same. However, he explains, clinics charge a lot more for surrogacy as the clinic manages everything. From finding the surrogate to hiring her and providing her with food, supplements, and accommodation until the baby is delivered.

Today, without any legal rights, this high markup and largely cash-driven business have no parent. But despite the impact this has had on the Indian fertility market, private equity firms are still bullish about the sector. Indira IVF—India’s largest IVF chain, with 60 clinics—secured funding from US-based private equity firm TA Associates last week. The second-largest chain, Nova Pulse, which boasts 20 centers, claims that it is in advanced funding talks with TPG Growth. However, one senior executive privy to the conversations between TPG and Nova says the deal is final. TPG will own over 90% of the company.